4

THE FOREIGN CONTRIBUTION

(REGULATION) ACT, 2010
LEARNING OUTCOMES
By the end of this Chapter, you will be able to-
 Know significant terminologies used in the Act.
 Understand how the law regulates the acceptance and utilization of
foreign contribution
 Know of foreign hospitality made by individuals, associations or
companies
 Identify the restrictions on acceptance and utilisation of foreign
contribution or foreign hospitality
 Know basic requisite for the registration of persons to be regulated in this
Act
 How the persons regulated under this Act manages the financial aspect
with respect to the foreign contribution
 Identify the adjudicating authority, the provisions related to appeal and
revision, and offences and penalties on contravention of the compliances.

© The Institute of Chartered Accountants of India

 4.2 CORPORATE AND ECONOMIC LAWS

1. INTRODUCTION
The Foreign Contribution (Regulation) Act, 2010, is an Act to consolidate the law to regulate the
acceptance and utilisation of foreign contribution or foreign hospitality by certain individuals or
associations or companies and to prohibit acceptance and utilisation of foreign contribution or foreign
hospitality for any activities detrimental to the national interest and for matters connected therewith
or incidental thereto.
The flow of foreign contribution to India is regulated under Foreign Contribution (Regulation) Act,
2010, Foreign Contribution (Regulation) Rules, 2011 and other notification / orders etc., issued
thereunder from time to time.
Structure of the Act
The Foreign Contribution (Regulation) Act, 2010, comprises of nine chapters with 54 sections.

Chapter No. Chapter Name

Chapter I Preliminary (Section 1- 2)
Chapter II Regulation of Foreign Contribution and Foreign Hospitality (Section 3 -10)
Chapter III Registration (Section 11- 16)
Chapter IV Accounts, Intimation, Audit and Disposal of Assets, etc. (Section 17- 22)
Chapter V Inspection, Search and Seizure (section 23-27)
Chapter VI Adjudication (Section 28-29)
Chapter VII Appeal and Revision (Section 31- 32)
Chapter VIII Offences and Penalties (Section 33- 41)
Chapter IX Miscellaneous (Section 42- 54)

Extent, Application and Commencement of FCRA (Section 1)

As per Section 1(2) of FCRA, 2010, the provisions of the Act shall apply to:
• Whole of India
• Citizens of India outside India; and
• Associate Branches or subsidiaries, outside India, of companies or bodies corporate,
registered or incorporated in India.
As per section 1(3) of the Act, the Central Government hereby appointed the 1st day of May, 2011
as the date on which the provisions of the said Act came into force.

© The Institute of Chartered Accountants of India

 THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.3

2. IMPORTANT DEFINITIONS (SECTION 2)

In this Act, unless the context otherwise requires,—
“Association” means an association of individuals, whether incorporated or not, having an office in
India and includes a society, whether registered under the Societies Registration Act, 1860 (21 of
1860), or not, and any other organisation, by whatever name called;
“foreign company” means any company or association or body of individuals incorporated outside
India and includes :—
• a foreign company within the meaning of section 591 of the Companies Act, 1956 (Section
379 of the Companies Act, 2013)
• Company which is a subsidiary of a foreign company;
• the registered office or principal place of business of a foreign company referred to in sub-
clause (i) or company referred to in sub-clause (ii) above;
• a multi-national corporation.
Explanation.—For the purposes of this sub-clause, a corporation incorporated in a foreign country
or territory shall be deemed to be a multi-national corporation if such corporation,—
(a) has a subsidiary or a branch or a place of business in two or more countries or territories; or
(b) carries on business, or otherwise operates, in two or more countries or territories;
[Section 2(g)]
“foreign contribution” means the donation, delivery or transfer made by any foreign source,—
(i) of any article, not being an article given to a person as a gift for his personal use, if the market
value, in India, of such article, on the date of such gift, is not more than such sum as may be
specified from time to time, by the Central Government by the rules made by it in this behalf;
(This sum has been specified as ` 25,000/- as per the Rule 6A of the Foreign Contribution
(Regulation) Amendment Rules, 2012 )
(ii) any currency, whether Indian or foreign;
(iii) of any security as defined in the Securities Contracts (Regulation) Act, 1956 and includes any
foreign security as defined in the Foreign Exchange Management Act, 1999 .
Explanation 1—A donation, delivery or transfer of any article, currency or foreign security referred
to in this clause by any person who has received it from any foreign source, either directly or through
one or more persons, shall also be deemed to be foreign contribution within the meaning of this
clause.

© The Institute of Chartered Accountants of India

 4.4 CORPORATE AND ECONOMIC LAWS

Explanation 2—The interest accrued on the foreign contribution deposited in any bank referred to
in section 17(1) or any other income derived from the foreign contribution or interest thereon shall
also be deemed to be foreign contribution within the meaning of this clause.
Explanation 3—Any amount received, by any person from any foreign source in India, by way of
fee (including fees charged by an educational institution in India from foreign student) or towards
cost in lieu of goods or services rendered by such person in the ordinary course of his business,
trade or commerce whether within India or outside India or any contribution received from an agent
of a foreign source towards such fee or cost shall be excluded from the definition of foreign
contribution within the meaning of this clause; [Section 2(h)]
Example: Whether earnings from foreign client(s) by a person in lieu of goods sold or a service
rendered by it is treated as foreign contribution?
Answer: No. As per the above explanation 3, foreign contribution excludes earnings from foreign
client(s) by a person in lieu of goods sold or services rendered by it as this is a transaction of
commercial nature.
In terms of FCRA, 2010 "person" includes:
(i) an individual;
(ii) a Hindu undivided family;
(iii) an association;
(iv) a company registered under section 25 of the Companies Act, 1956 (now Section 8 of
Companies Act, 2013). [Section 2(m)]
“foreign hospitality” means any offer, not being a purely casual one, made in cash or kind by a
foreign source for providing a person with the costs of travel to any foreign country or territory or
with free boarding, lodging, transport or medical treatment; [Section 2(i)]
“foreign source” includes,—
(i) the Government of any foreign country or territory and any agency of such Government;
(ii) any international agency, not being the United Nations or any of its specialized agencies, the
World Bank, International Monetary Fund or such other agency as the Central Government
may, by notification, specify in this behalf;
(iii) a foreign company;
(iv) a corporation, not being a foreign company, incorporated in a foreign country or territory;
(v) a multi-national corporation referred to in Section 2(g) sub-clause (iv) of FCRA, 2010;
(vi) a company within the meaning of the Companies Act, 1956, and more than one-half of the
nominal value of its share capital is held, either singly or in the aggregate, by one or more of
the following, namely:-

© The Institute of Chartered Accountants of India

 THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.5

A. the Government of a foreign country or territory;

B. the citizens of a foreign country or territory;
C. corporations incorporated in a foreign country or territory;
D. trusts, societies or other associations of individuals (whether incorporated or not),
formed or registered in a foreign country or territory;
E. Foreign company;
Provided that where the nominal value of share capital is within the limits specified for foreign
investment under the Foreign Exchange Management Act, 1999, or the rules or regulations
made thereunder, then, notwithstanding the nominal value of share capital of a company
being more than one-half of such value at the time of making the contribution, such company
shall not be a foreign source.
(vii) a trade union in any foreign country or territory, whether or not registered in such foreign
country or territory;
(viii) a foreign trust or a foreign foundation, by whatever name called, or such trust or foundation
mainly financed by a foreign country or territory;
(ix) a society, club or other association or individuals formed or registered outside India;
(x) a citizen of a foreign country;”
A few bodies/ organisations of the United Nations, World Bank and some other International
agencies or multilateral organisations are exempted from this definition, and are not treated as
foreign source. Hence, the funds received from them are not considered as foreign contribution.
[Section 2(j)]
Example: Whether 100% subsidiary of foreign company in IT sector can give donation to trust who
doesn’t have registration under FCRA?
Answer: Yes, it can. As per proviso of Section 2(j)(vi) since the investment is within limits of FEMA,
hence though may be 100% subsidiary of foreign company but still its not a foreign source.
“political party” means—
(i) an association or body of individual citizens of India—
(A) to be registered with the Election Commission of India as a political party under
section 29A of the Representation of the People Act, 1951, or
(B) which has set up candidates for election to any Legislature, but is not so registered or
deemed to be registered under the Election Symbols (Reservation and Allotment)
Order, 1968;

© The Institute of Chartered Accountants of India

 4.6 CORPORATE AND ECONOMIC LAWS

(ii) a political party mentioned in column 2 of Table 1 and Table 2 to the notification of the
Election Commission of India No. 56/J&K/02, dated the 8th August, 2002, as in force for the
time being;[ Section 2(n)]
“relative” has the meaning assigned to it in section 2(41) of the Companies Act, 1956 (Now section
2(77) of the Companies Act, 2013) [Section 2(r)]

3. REGULATION OF FOREIGN CONTRIBUTION AND

FOREIGN HOSPITALITY
The provision related to the regulation of foreign contribution and foreign hospitality is given in
chapter II of the Act. It covers section 3 to 10 of the Act. The chapter broadly focuses on whose
foreign contribution can be accepted, on whom the provision contained under this chapter shall be
applicable, restriction on acceptance of foreign hospitality and certain prohibitions.
(I) Prohibition to accept foreign contribution (Section 3)
(1) No foreign contribution shall be accepted by any:
(a) candidate for election;
(b) correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered
newspaper;
(c) Judge, Government servant or employee of any corporation or any other body
controlled or owned by the Government;
(d) member of any Legislature;
(e) political party or office-bearer thereof;
(f) organisation of a political nature as may be specified under section 5(1) by the Central
Government;
(g) association or company engaged in the production or broadcast of audio news or audio
visual news or current affairs programmes through any electronic mode, or any other
electronic form as defined in the Information Technology Act, 2000 or any other mode
of mass communication;
(h) correspondent or columnist, cartoonist, editor, owner of the association or company
referred to in clause (g).
Explanation.—In clause (c) and section 6, the expression “corporation” means a
corporation owned or controlled by the Government and includes a Government company as
defined in section 617 of the Companies Act, 1956 (Now section 2(45) of the Companies Act,
2013)

© The Institute of Chartered Accountants of India

 THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.7

(2) Following other persons are also prohibited from accepting foreign contribution:
(a) Person, resident in India, and citizen of India resident outside India- shall not
accept any foreign contribution, or acquire or agree to acquire any currency from a
foreign source, on behalf of any political party, or any person referred to in sub-section
(1) as stated above, or both.
(b) Person, resident in India- shall not deliver any currency, whether Indian or foreign,
which has been accepted from any foreign source, to any person if he knows or has
reasonable cause to believe that such other person intends, or is likely, to deliver such
currency to any political party or any person referred to in sub-section (1), or both.
(c) Citizen of India resident outside India- shall not deliver any currency, whether Indian
or foreign, which has been accepted from any foreign source, to—
(i) any political party or any person referred to in sub-section (1), or both; or
(ii) any other person, if he knows or has reasonable cause to believe that such
other person intends, or is likely, to deliver such currency to a political party or
to any person referred to in sub-section (1), or both.
(3) Person receiving any currency, whether Indian or foreign, from a foreign source on
behalf of any person or class of persons (referred to in section 9) shall not deliver such
currency—
(a) to any person other than a person for which it was received, or
(b) to any other person, if he knows or has reasonable cause to believe that such other
person intends, or is likely, to deliver such currency to a person other than the person
for which such currency was received. See More
(II) Persons to whom section 3 shall not apply (Section 4)
Nothing contained in section 3 shall apply to the acceptance, by any person specified in that section, of any
foreign contribution where such contribution is accepted by him, subject to the provisions of section 10,—
(a) by way of salary, wages or other remuneration due to him or to any group of persons
working under him, from any foreign source or by way of payment in the ordinary course of
business transacted in India by such foreign source; or
(b) by way of payment, in the course of international trade or commerce, or in the ordinary
course of business transacted by him outside India; or
(c) as an agent of a foreign source in relation to any transaction made by such foreign source
with the Central Government or State Government; or
(d) by way of a gift or presentation made to him as a member of any Indian delegation, provided
that such gift or present was accepted in accordance with the rules made by the Central
Government with regard to the acceptance or retention of such gift or presentation; or

© The Institute of Chartered Accountants of India

 4.8 CORPORATE AND ECONOMIC LAWS

(e) from his relative; or

(f) by way of remittance received, in the ordinary course of business through any official
channel, post office, or any authorised person in foreign exchange under the Foreign
Exchange Management Act, 1999 (42 of 1999); or
(g) by way of any scholarship, stipend or any payment of like nature :
Provided that in case any foreign contribution received by any person specified under section 3, for
any of the purposes other than those specified under this section, such contribution shall be deemed
to have been accepted in contravention of the provisions of section 3.
Example: Whether foreign remittances received from a relative are to be treated as foreign
contribution as per FCRA, 2010?
Answer: No. As per Section 4(e) of FCRA, 2010 and Rule 6 of FCRR, 2011, even the persons
prohibited under section 3, i.e., persons not permitted to accept foreign contribution, are allowed to
accept foreign contribution from their relatives. However, in terms of Rule 6 of FCRR, 2011, any
person receiving foreign contribution in excess of one lakh rupees or equivalent thereto in a financial
year from any of his relatives shall inform the Central Government 1by uploading details
electronically online in prescribed Form within thirty days from the date of receipt of such
contribution.
Example: Whether donation given by Non-Resident Indians (NRIs) is treated as ‘foreign
contribution’?
Answer: Contributions made by a citizen of India living in another country (i.e., Non-Resident
Indian), from his personal savings, through the normal banking channels, is not treated as foreign
contribution. However, while accepting any donations from such NRI, it is advisable to obtain his
passport details to ascertain that he/she is an Indian passport holder.
(III) Restriction on acceptance of foreign hospitality (Section 6)
As per Section 6 of the Act , following categories of persons require prior permission of the Central
Government before accepting Foreign Hospitality, while visiting any country or territory outside India,:-

Members of a Legislature

Office bearers of political parties

Judges

Government servants

Employees of any corporation or any other body owned or controlled by the Government.

1 Amended vide the Foreign Contribution (Regulation) Amendment Rules, 2019 notified on 7th March, 2019

© The Institute of Chartered Accountants of India

 THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.9

Exception: Provided that it shall not be necessary to obtain any such permission for an emergent
medical aid needed on account of sudden illness contracted during a visit outside India. But, where
such foreign hospitality has been received, the person receiving such hospitality shall give an
intimation to the Central Government as to the receipt of such hospitality within one month from the
date of receipt of such hospitality, and the source from which, and the manner in which, such
hospitality was received.
As per Rule 7 of FCR, Rule 2011 foreign hospitality may be received by specified categories of
persons in the following manner
(1) Any person belonging to any of the categories specified in section 6 who wishes to avail of
foreign hospitality shall apply 2electronically online to the Central Government in prescribed
Form for prior permission to accept such foreign hospitality.
(2) Every application for acceptance of foreign hospitality shall be accompanied by an invitation
letter from the host or the host country, as the case may be, and administrative clearance of
the Ministry or department concerned in case of visits sponsored by a Ministry or department
of the Government.
(3) The application for grant of permission to accept foreign hospitality must reach the
appropriate authority ordinarily two weeks before the proposed date of onward journey.
(4) In case of emergent medical aid needed on account of sudden illness during a visit abroad,
the acceptance of foreign hospitality shall be required to be intimated to the Central
Government within sixty days of such receipt giving full details including the source,
approximate value in Indian Rupees, and the purpose for which and the manner in which it
was utilised.
However, no such intimation is required if the value of such hospitality in emergent medical aid is
upto one lakh rupees or equivalent thereto.
Guidelines for consideration of proposals for acceptance of foreign hospitality under the Foreign
Contribution (Regulation) Act, 2010: The provisions under the Act/Rules relating to 'foreign hospitality'
and guidelines to be followed for consideration of proposals for acceptance of hospitality.
As per regulation 6 of the said guidelines the following cases need not be submitted to this Ministry
for grant of permission to accept foreign hospitality:-
(i) Where the entire expenditure on the proposed foreign visit is being met by the Central/ State
Government or any Central/State PSU etc.
(ii) Where the proposed foreign visit is being undertaken by a person in his/her personal capacity and
the entire expenditure thereon is being met by the person concerned.

2 Foreign Contribution (Regulation) Amendment Rules, 2019 vide Notification dated 7th March, 2019

© The Institute of Chartered Accountants of India

 4.10 CORPORATE AND ECONOMIC LAWS

(iii) Where the foreign hospitality is being provided by an Indian national living in a foreign country or
territory.
(iv) Cases involving acceptance of an assignment on salary, fee or remuneration etc.
(v) Cases involving funding offered by an agency/organization mentioned in Annexure-2.
(vi) Cases involving visits undertaken by the Members of an Indian Parliamentary delegation under
bilateral exchange.
(vii) Cases involving visits undertaken in pursuance of a bilateral agreement between the Government
of India and the Government of the country concerned, approved by the Ministry of Finance
(Department of Economics Affairs).
(viii) Cases involving long term/short term foreign training courses approved by the Ministry of
Personnel, Training and Public Grievances.
(IV) Prohibition to transfer foreign contribution to other person (Section 7)
According to the section, person who—
(a) is registered and granted a certificate, or has obtained prior permission under this Act; and
(b) receives any foreign contribution,
shall not transfer such foreign contribution to any other person unless such other person is also
registered and had been granted the certificate or obtained the prior permission under this Act:
However, that such person may transfer, with the prior approval of the Central Government, a part
of such foreign contribution to any other person who has not been granted a certificate or obtained
permission under this Act in accordance with the rules made by the Central Government.
Rule 24 of FCRR, 2011, prescribes the procedure for transferring foreign contribution to any
unregistered person as under-
(1) Limit on transfer of foreign contribution: A person who has been granted a certificate of
registration or prior permission under section 11 and intends to transfer part of the foreign
contribution received by him to a person who has not been granted a certificate of registration
or prior permission under the Act, may transfer such foreign contribution to an extent not
exceeding ten per cent of the total value thereof and for this purpose, make an application to
the Central Government in prescribed Form.
(2) Declaration to be annexed: Every application made under sub-rule (1) shall be
accompanied by a declaration to the effect that-
(a) the amount proposed to be transferred during the financial year is less than ten per
cent of the total value of the foreign contribution received by him during the financial
year;

© The Institute of Chartered Accountants of India

 THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.11

(b) the transferor shall not transfer any amount of foreign contribution until the Central
Government approves such transfer.
(3) Eligibility of recipient: A person who has been granted a certificate of registration or prior
permission under section 11 shall not be required to seek the prior approval of the Central
Government for transferring the foreign contribution received by him to another person who
has been granted a certificate of registration or prior permission under the Act provided that
the recipient has not been proceeded against under any of the provisions of the Act.
(4) Responsibility for proper utilisation of the foreign contribution: Both the transferor and
the recipient shall be responsible for ensuring proper utilisation of the foreign contribution so
transferred and such transfer of foreign contribution shall be reflected in the returns in Form
FC-6 to be submitted by both the transferor and the recipient."
(V) Restriction to utilize foreign contribution for administrative purpose (Section 8)
(1) Every person, who is registered and granted a certificate or given prior permission under this
Act and receives any foreign contribution, shall—
(a) utilise such contribution for the purposes for which the contribution has been received:
Provided that any foreign contribution or any income arising out of it shall not be used for
speculative business;
Provided further that the Central Government shall, by rules, specify the activities or business
which shall be construed as speculative business for the purpose of this section;
Speculative activities have been defined in Rule 4 of FCR, Rule 2011 as under:-
(i) any activity or investment that has an element of risk of appreciation or depreciation
of the original investment, linked to marked forces, including investment in mutual
funds or in shares;
(ii) participation in any scheme that promises high returns like investment in chits or land
or similar assets not directly linked to the declared aims and objectives of the
organization or association.
(b) not defray as far as possible such sum, not exceeding fifty per cent of such contribution,
received in a financial year, to meet administrative expenses:
Provided that administrative expenses exceeding fifty per cent of such contribution may be
defrayed with prior approval of the Central Government.
(2) The Central Government may prescribe the elements which shall be included in the
administrative expenses and the manner in which the administrative expenses referred to in sub-
section (1) shall be calculated.

© The Institute of Chartered Accountants of India

 4.12 CORPORATE AND ECONOMIC LAWS

(VI) Power of Central Government to prohibit receipt of foreign contribution, etc., in certain
cases (Section 9)
The Central Government may—
(a) prohibit any person or organisation (not specified in section 3), from accepting any foreign
contribution;
(b) require any person or class of persons, (not specified in section 6), to obtain prior permission
of the Central Government before accepting any foreign hospitality;
(c) require any person or class of persons (not specified in section 11), to furnish intimation as
to the amount of any foreign contribution received by such person or class of persons as the
case may be, and the source from which and the manner in which such contribution was
received and the purpose for which and the manner in which such foreign contribution was
utilised;
(d) require any person or class of persons specified in that Section 11(1) to obtain prior
permission of the Central Government before accepting any foreign contribution;
(e) require any person or class of persons, (not specified in section 6), to furnish intimation, as
to the receipt of any foreign hospitality, the source from which and the manner in which such
hospitality was received.
Exception: Above prohibition or requirement shall not be made unless the Central Government is
satisfied that the acceptance of foreign contribution by such person or class of persons, as the case
may be, or the acceptance of foreign hospitality by such person, is likely to affect prejudicially—
(i) the sovereignty and integrity of India; or
(ii) public interest; or
(iii) freedom or fairness of election to any Legislature; or
(iv) friendly relations with any foreign State; or
(v) harmony between religious, racial, social, linguistic or regional groups, castes or
communities.
(VII) Power to prohibit payment of currency received in contravention of the Act (Section 10)
Where the Central Government is satisfied, after making such inquiry, that any person has in his
custody or control any-
• article or
• currency or
• security,

© The Institute of Chartered Accountants of India

 THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.13

whether Indian or foreign, which has been accepted by such person in contravention of any of the
provisions of this Act, it may, by order in writing prohibit such person from-
paying, delivering, transferring or otherwise dealing with, such article or currency or security.
A copy of such order shall be served upon the person so prohibited as per Rule 8 of the FCR, Rule
2011, and thereupon the provisions of section 7 of the Unlawful Activities (Prevention) Act, 1967
shall, apply to, or in relation to, such article or currency or security and references in the said sub-
sections to moneys, securities or credits shall be taken as references to such article or currency or
security.

4. REGISTRATION
The provisions related to registration of persons for acceptance of foreign contribution, grant of
certificate, its suspension, cancellation and renewal are dealt in chapter III of the FCRA.
There are two modes to accept foreign contribution according to FCRA, 2010-

modes to accept
foreign
contribution

• by Registration
• through Prior Permission

(I) Registration of certain persons with Central Government (Section 11)

(1) Person having a definite cultural, economic, educational, religious or social
programme- shall not accept foreign contribution unless such person obtains a certificate of
registration from the Central Government.
However, that-
• any association registered with the Central Government under section 6, or
• granted prior permission under that section of the Foreign Contribution (Regulation) Act,
1976, as it stood immediately before the commencement of this Act,

© The Institute of Chartered Accountants of India

 4.14 CORPORATE AND ECONOMIC LAWS

shall be deemed to have been registered or granted prior permission, as the case may be, under
this Act and such registration shall be valid for a period of five years from the date on which this
section comes into force.
(2) Acceptance of foreign contribution after obtaining prior permission of the Central
Government: Every person may, if it is not registered with the Central Government, accept any
foreign contribution only after obtaining the prior permission of the Central Government and such
prior permission shall be valid for the specific purpose for which it is obtained and from the specific
source
Further, if the person has been found guilty of violation of any of the provisions of this Act or the
Foreign Contribution (Regulation) Act, 1976, the unutilised or unreceived amount of foreign
contribution shall not be utilised or received, as the case may be, without the prior approval of the
Central Government.
(3) The Central Government may, by notification in the Official Gazette, specify—
(i) the person or class of persons who shall obtain its prior permission before accepting the
foreign contribution; or
(ii) the area or areas in which the foreign contribution shall be accepted and utilised with the prior
permission of the Central Government; or
(iii) the purpose or purposes for which the foreign contribution shall be utilised with the prior
permission of the Central Government; or
(iv) the source or sources from which the foreign contribution shall be accepted with the prior
permission of the Central Government.
Example: Can a private limited company or a partnership firm get registration or prior permission
under FCRA, 2010?
Answer: Yes, a private limited company too may seek prior permission/registration for receiving
foreign funds in case they wish to do some charitable work at some point of time.
Example: Whether an individual or a Hindu Undivided Family (HUF) can be given registration or
prior permission to accept foreign contribution in terms of section 11 of FCRA, 2010?
Answer: Yes. The definition of the ‘person’ in the Foreign Contribution (Regulation) Act, 2010
includes any individual and ‘Hindu Undivided Family’ among others. As such an Individual or an HUF
is also eligible to apply for prior permission to accept foreign contribution.
Example: Whether organisations under Central/State Governments are required to obtain
registration or prior permission under FCRA, 2010 for accepting foreign contribution?
Answer: Yes. However, all bodies constituted or established by or under a Central Act or a State
Act requiring to have their accounts compulsorily audited by Comptroller & Auditor General of India
are exempted from the operations of all the provisions of FCRA, 2010.

© The Institute of Chartered Accountants of India

 THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.15

(II) Grant of certificate of registration (Section 12)

1. Conditions to be met for the grant of registration and prior permission
In terms of Sec.12 (4) of FCRA, 2010, the following shall be the conditions for the grant of registration
and prior permission:
(a) The 'person' making an application for registration or grant of prior permission-
i. is not fictitious or benami;
ii. has not been prosecuted or convicted for indulging in activities aimed at conversion
through inducement or force, either directly or indirectly, from one religious faith to
another;
iii. has not been prosecuted or convicted for creating communal tension or disharmony in
any specified district or any other part of the country;
iv. has not been found guilty of diversion or mis-utilisation of its funds;
v. is not engaged or likely to engage in propagation of sedition or advocate violent
methods to achieve its ends;
vi. is not likely to use the foreign contribution for personal gains or divert it for undesirable
purposes;
vii. has not contravened any of the provisions of this Act;
viii. has not been prohibited from accepting foreign contribution;
ix. the person being an individual, such individual has neither been convicted under any
law for the time being in force nor any prosecution for any offence is pending against
him.
x. the person being other than an individual, any of its directors or office bearers has
neither been convicted under any law for the time being in force nor any prosecution
for any offence is pending against him.
(b) the acceptance of foreign contribution by the association/ person is not likely to affect
prejudicially -
i. the sovereignty and integrity of India;
ii. the security, strategic, scientific or economic interest of the State;
iii. the public interest;
iv. freedom or fairness of election to any Legislature;
v. friendly relation with any foreign State;

© The Institute of Chartered Accountants of India

 4.16 CORPORATE AND ECONOMIC LAWS

vi. harmony between religious, racial, social, linguistic, regional groups, castes or
communities.
(c) the acceptance of foreign contribution-
i. shall not lead to incitement of an offence;
ii. shall not endanger the life or physical safety of any person.
(2) Procedure for grant of certificate of Registration

Application to be made to the Central Government

CG on receipt of duly filled application, may register such person

within 90 days and grant a certificate/give permission

in case of refusal, CG shall record the reasons and furnish the copy
to the applicant

certificate granted valid for 5 years and prior permission valid for
specific purpose/specific amount of Foreign contribution

(1) An application by a person, referred to in section 11 for grant of certificate or giving prior
permission, shall be made to the Central Government in such form and manner and along
with such fee, as may be prescribed.
(2) On receipt of an application the Central Government shall, by an order, if the application is
not in the prescribed form or does not contain any of the particulars specified in that form,
reject the application.
(3) If on receipt of an application for grant of certificate or giving prior permission and after making
such inquiry as the Central Government deems fit, it is of the opinion that the conditions
specified in sub-section (4) are satisfied, it may, ordinarily within ninety days from the date of
receipt of application, register such person and grant him a certificate or give him prior
permission, as the case may be, subject to such terms and conditions as may be prescribed.
If that in case the Central Government does not grant, within the said period of ninety days,
a certificate or give prior permission, it shall communicate the reasons therefor to the
applicant.
And that a person shall not be eligible for grant of certificate or giving prior permission, if his
certificate has been suspended and such suspension of certificate continues on the date of
making application.

© The Institute of Chartered Accountants of India

 THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.17

(4) Where the Central Government refuses the grant of certificate or does not give prior
permission, it shall record in its order the reasons therefor and furnish a copy thereof to the
applicant.
However, the Central Government may not communicate the reasons for refusal for grant of
certificate or for not giving prior permission to the applicant under this section in cases where
is no obligation to give any information or documents or records or papers under the Right to
Information Act, 2005.
(5) The certificate granted shall be valid for a period of five years from the date of its issue and
the prior permission shall be valid for the specific purpose or specific amount of foreign
contribution proposed to be received, as the case may be.
(III) Suspension of certificate (Section 13)
(1) Period of suspension of certificate: Where the Central Government is satisfied that
pending consideration of the question of cancelling the certificate on any of the grounds
mentioned in sub- section 14(1), it is necessary so to do, it may, by order in writing, suspend
the certificate for such period not exceeding one hundred and eighty days as may be specified
in the order.
(2) Effect of suspension: Every person whose certificate has been suspended shall—
(a) not receive any foreign contribution during the period of suspension of certificate .
However, the Central Government, on an application made by such person, if it
considers appropriate, allow receipt of any foreign contribution by such person on such
terms and conditions as it may specify;
(b) Not utilise, in the prescribed manner, the foreign contribution in his custody without
the prior approval of the Central Government.
Rule 14 of FCR, Rule 2011 defines the extent of amount that can be utilised in case of
suspension of the certificate of registration. The unspent amount that can be utilised in case
of suspension of a certificate of registration may be as under:—
(a) In case the certificate of registration is suspended under sub-section (1) of section 13
of the Act, up to twenty-five per cent of the unutilised amount may be spent, with
the prior approval of the Central Government, for the declared aims and objects for
which the foreign contribution was received.
(b) The remaining seventy-five per cent of the unutilised foreign contribution shall
be utilised only after revocation of suspension of the certificate of registration.

© The Institute of Chartered Accountants of India

 4.18 CORPORATE AND ECONOMIC LAWS

(IV) Cancellation of certificate (Section 14)

(1) The Central Government may, by an order, cancel the certificate if —
(a) the holder of the certificate has made a statement in, or in relation to, the
application for the grant of registration or renewal thereof, which is incorrect or false;
or
(b) the holder of the certificate has violated any of the terms and conditions of the
certificate or renewal thereof; or
(c) in the opinion of the Central Government, it is necessary in the public interest to
cancel the certificate; or
(d) the holder of certificate has violated any of the provisions of this Act or rules or
order made thereunder; or
(e) if the holder of the certificate has not been engaged in any reasonable activity in
its chosen field for the benefit of the society for two consecutive years or has become
defunct.
(2) No order of cancellation of certificate under this section shall be made unless the person
concerned has been given a reasonable opportunity of being heard.
(3) Cooling period of 3 years: Any person whose certificate has been cancelled under this
section shall not be eligible for registration or grant of prior permission for a period of three
years from the date of cancellation of such certificate.

cancellation of certificate by CG , by order where -

holder of the certificate has
holder of the certificate has holder of the certificate has holder of certificate has
it is necessary in the public not been engaged in any
made a incorrect /false violated any of the terms and violated any of the provisions
interest reasonable activity for two
statement in application conditions of the certificate of this Act /rules / order
consecutive years

(V) Management of foreign contribution of person whose certificate has been cancelled
(Section 15)
(1) Vesting of custody: The foreign contribution and assets created out of the foreign
contribution in the custody of every person whose certificate has been cancelled - shall vest
in banking authority concerned till the Central Government issues further directions in the
matter as per Rule 15 of the FCR Rules, 2011.
(2) Role of Authority: Such an authority may, if it considers necessary and in public interest-
manage the activities of the person, as the Central Government may direct and such authority
may utilise the foreign contribution or dispose of the assets created out of it in case adequate
funds are not available for running such activity.

© The Institute of Chartered Accountants of India

 THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.19

(3) Return of vested FC & assets: The authority shall- return the foreign contribution (FC) and
the assets vested upon it to the person, if such person is subsequently registered under this
Act.
(VI) Renewal of certificate (Section 16)
(1) Period for applying for renewal of certificate: Every person who has been granted a
certificate, shall have such certificate renewed within six months before the expiry of the
period of the certificate.
(2) Filing of an application to CG: The application for renewal of the certificate shall be made
to the Central Government in such form and manner with such fee as may be prescribed.
(3) Period for renewal of certificate The Central Government shall renew the certificate,
ordinarily within ninety days from the date of receipt of application for renewal of certificate
subject to such terms and conditions as it may deem fit and grant a certificate of renewal for
a period of five years.
However, in case the Central Government does not renew the certificate within the said period
of ninety days, it shall communicate the reasons therefor to the applicant.
Further that the Central Government may refuse to renew the certificate in case where a
person has violated any of the provisions of this Act or rules made thereunder.
Procedure for renewal of registration certificate - 3Rule 12 of FCR,Rule 2011 states that-
(1) Every certificate of registration issued to a person shall be liable to be renewed after the
expiry of five years from the date of its issue on proper application.
(2) Every person shall apply to the Central Government electronically online in prescribed
Form six months before the date of expiry of the certificate of registration, for its renewal.
(3) An application made for renewal of the certificate of registration shall be accompanied by a
fee of `1500 (One Thousand Five Hundred rupees only ).
(4) The fee for renewal of the certificate of registration shall be remitted by demand draft or
banker's cheque in favour of the "Pay and Accounts Officer, Ministry of Home Affairs",
payable at New Delhi or through online electronic payment gateway as specified by the
Central Government.
(5) In case no application for renewal of registration is received or such application is not
accompanied by the requisite fee, the validity of the certificate of registration of such person
shall be deemed to have ceased from the date of completion of the period of five years from
the date of the grant of registration.

3 Amended through the Foreign Contribution (Regulation) Amendment Rules, 2019 vide notification dated 7th March,

2019.

© The Institute of Chartered Accountants of India

 4.20 CORPORATE AND ECONOMIC LAWS

Example: A certificate of registration granted on the 1st January, 2012 shall be valid till the
31st December, 2016. A request for renewal of the registration certificate shall reach the
Central Government, accompanied by the requisite fee, by the 30th June, 2016. If no
application is received or is not accompanied by the renewal fee, the validity of the registration
certificate issued on the 1st January 2012 shall be deemed to have lapsed with effect from
the close of the day on 31st December, 2016.
(6) If the validity of the certificate of registration of a person has ceased in accordance with the
provisions of these rules, a fresh request for the grant of a certificate of registration may be
made by the person to the Central Government as per the provisions of rule 9.
(7) In case a person provides sufficient grounds, in writing, explaining the reasons for not
submitting the certificate of registration for renewal within the stipulated time, his application
may be accepted for consideration along with the requisite fee and with late fee of Rs.5000/-
, but not later than one year after the expiry of the original certificate of registration.

5. ACCOUNTS, INTIMATION, AUDIT AND DISPOSAL OF

ASSETS, ETC.
Provisions related to matters incidental to maintenance of accounts are dealt under chapter IV of
the FCRA. It covers section 17 to 22 of the Act.
(I) Foreign contribution through scheduled bank (Section 17)
Every person who has been granted a certificate or given prior permission shall receive foreign
contribution in a single account only through such one of the branches of a bank as he may specify
in his application for grant of certificate. However, person may open one or more accounts in one or
more banks for utilising the foreign contribution received by him. No funds other than foreign
contribution shall be received or deposited in such account or accounts.
Every bank or authorised person in foreign exchange shall report to such authority as may be
specified —
(a) prescribed amount of foreign remittance;
(b) the source and manner in which the foreign remittance was received; and
(c) other particulars, in such form and manner as may be prescribed.
According to Rule 16 of FCR, Rule 2011, the bank shall report to the Central Government within
forty-eight hours any transaction in respect of receipt or utilisation of any foreign contribution by any
person whether or not such person is registered or granted prior permission under the Act.
Example: Can foreign contribution be mixed with local receipts?
Answer: No. Foreign contribution cannot be deposited or utilised from the bank account being used
for domestic funds.

© The Institute of Chartered Accountants of India

 THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.21

(II) Intimation (Section 18)

Every person who has been granted a certificate or given prior approval shall give an intimation to the
Central Government, and such other authority as may be specified by the Central Government –
• as to the amount of each foreign contribution received by it,
• the source from which, and
• the manner in which such foreign contribution was received, and the purposes for which, and
the manner in which such foreign contribution was utilised by him.
Every person receiving foreign contribution shall submit a copy of a statement with the particulars
of foreign contribution received duly certified by officer of the bank or authorised person in foreign
exchange and furnish the same to the Central Government along with the intimation.
(III) Maintenance of accounts (Section 19)
Every person who has been granted a certificate or given prior approval under this Act shall maintain,
in such form and manner as may be prescribed,—
(a) an account of any foreign contribution received by him; and
(b) a record as to the manner in which such contribution has been utilised by him.
Rule 11 of FCR, Rule 2011 states that every person who has been granted registration or prior
permission under section 12 shall maintain a separate set of accounts and records, exclusively, for
the foreign contribution received and utilised.
(IV) Audit of accounts (Section 20)
(1) Where any person who has been granted a certificate or given prior permission, fails to furnish
any intimation under this Act ,or the intimation so furnished is not in accordance with law or
if, after inspection of such intimation, the Central Government has any reasonable cause to
believe that any provision of this Act has been, or is being, contravened, the Central
Government may-
• by general or special order, authorise such Gazetted Officer, holding a Group A post
under the Central Government or any other officer or authority or organisation, as it
may think fit
• to audit any books of account kept or maintained by such person.
(2) Every such officer shall have the right to enter in or upon any premises at any reasonable
hour, before sunset and after sunrise, for the purpose of auditing the said books of account.
(3) Any information obtained from such audit shall be kept confidential and shall not be disclosed
except for the purposes of this Act.

© The Institute of Chartered Accountants of India

 4.22 CORPORATE AND ECONOMIC LAWS

(V) Disposal of assets created out of foreign contribution (Section 22)

Where any person who was permitted to accept foreign contribution under this Act-
(i) ceases to exist or has become defunct – in this case all the assets of such person shall be
disposed of in accordance with the provisions contained in any law for the time being in force
under which the person was registered or incorporated, and
(ii) in the absence of any such law- the Central Government may, having regard to the nature
of assets created out of foreign contribution received under this Act, by notification, specify
that all such assets shall be disposed of by such authority, in such manner and procedure as
may be prescribed.

6. ADJUDICATION
The provisions related to adjudication is given under chapter VI &VII covering sections from 28-31
of the Act.
Confiscation of article or currency or security obtained in contravention of the Act
(Section 28)
Any article or currency or security which is seized under the Act shall be liable to confiscation if such
article or currency or security has been adjudged under section 29 to have been received or obtained
in contravention of this Act.
Adjudication of confiscation (Section 29)
(1) Any confiscation referred to in section 28 may be adjudged—
(a ) without limit, by the Court of Session within the local limits of whose jurisdiction the
seizure was made; and
(b) subject to such limits as may be prescribed, by such officer, not below the rank of an
Assistant Sessions Judge, as the Central Government may, by notification in the
Official Gazette, specify in this behalf.
As per Rule 19 of FCR, Rule 2011 an officer above in clause(b), may adjudge confiscation
in relation to any article or currency seized under section 25, if the value of such article or the
amount of such currency seized does not exceed ` 10,00,000 (Ten lakh only).
(2) When an adjudication is concluded by the Court of Session or Assistant Sessions Judge, as
the case may be, the Sessions Judge or Assistant Sessions Judge may make such order as
he thinks fit for the disposal by confiscation or delivery of seized article or currency or security,
as the case may be, to any person claiming to be entitled to possession thereof or otherwise,
or which has been used for the commission of any offence under this Act.

© The Institute of Chartered Accountants of India

 THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.23

Procedure for confiscation (Section 30)

No order of adjudication of confiscation shall be made unless a reasonable opportunity of making a
representation against such confiscation has been given to the person from whom any article or
currency or security has been seized.
Appeal (Section 31)
(1) Where any person is aggrieved by any order, may prefer an appeal.

Where an order is passed by- Appeal to be made-

the Court of Session to the High Court to which such Court is subordinate
OR
any officer specified section 29(1)(b) Court of Session within the local limits of whose
jurisdiction such order of adjudication of confiscation
was made
Appeal may be preferred within one month from the date of communication to such person of the
order.
However, the appellate court may, allow such appeal to be preferred within a further period of
one month, but not thereafter.

(2) Any organisation referred to in section 3(1)(f), or any person or association referred to in
section 6 or section 9, aggrieved by an order made in pursuance of section 5 or by an order
of the Central Government refusing to give permission under this Act, or by any order made
by the Central Government section 12(2) or 12(4), or section 14(1), as the case may be, may,
• prefer an appeal against such order to the High Court within the local limits of whose
jurisdiction the appellant ordinarily resides or carries on business or personally works
for gain, or, where the appellant is an organisation or association, the principal office
of such organisation or association is located-
• within sixty days from the date of such order.
Revision of orders by Central Government (Section 32)
(1) Power to central Government- The Central Government may either-
• of its own motion or
• on an application for revision by the person registered under this Act,
call for and examine the record of any proceeding under this Act in which any such order has
been passed by it and may make such inquiry or cause such inquiry to be made and, subject
to the provisions of this Act, may pass such order thereon as it thinks fit.

© The Institute of Chartered Accountants of India

 4.24 CORPORATE AND ECONOMIC LAWS

(2) Restriction on entertainment of revision: The Central Government shall not of its own
motion revise any order under this section if the order has been made more than one year
previously.
(3) In the case of an application for revision under this section -the application must be made
within one year from the date on which the order in question was communicated to him or the
date on which he otherwise came to know of it, whichever is earlier.
Where if, the Central Government is satisfied that such person was prevented by sufficient
cause from making the application within that period - may admit an application made after
the expiry of that period.

7. OFFENCES AND PENALTIES

The provisions related to offences and Penalties are covered under sections 33 to 41 of the Act.
This part prescribes types of offences committed and the penalties levied for the same.

Types of offence Penalties levied

Any person who knowingly,— shall, on conviction by a court, be liable to
(a) gives false intimation under section 9(c) imprisonment for a term which may extend to
or section 18; or six months or with fine or with both.
(b) seeks prior permission or registration by
means of fraud, false representation or
concealment of material fact,
Any person, on whom any prohibitory order has • shall be punished with imprisonment for a
been served under section 10, pays, delivers, term which may extend to three years, or
transfers or otherwise deals with, any article with fine, or with both.
or currency or security, whether Indian or • the court trying such contravention may
foreign, in contravention of such prohibitory also impose on the person convicted an
order. additional fine equivalent to the market
value of the article or the amount of the
currency or security in respect of which the
prohibitory order has been contravened by
him or such part thereof as the court may
deem fit.
Whoever accepts, or assists any person, shall be punished with imprisonment for a term
political party or organisation in accepting, any which may extend to five years, or with fine, or
foreign contribution or any currency or security with both.
from a foreign source, in contravention of any
provision of this Act or any rule or order made
thereunder

© The Institute of Chartered Accountants of India

 THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.25

the court trying a person, who, in relation to any impose on such person a fine not exceeding
article or currency or security, whether Indian five times the value of the article or currency or
or foreign, does or omits to do any act which security or one thousand rupees, whichever is
act or omission would render such article or more, if such article or currency or security is
currency or security liable to confiscation under not available for confiscation, and the fine so
this Act, may, in the event of the conviction of imposed shall be in addition to any other fine
such person for the act or omission aforesaid which may be imposed on such person under
this Act.
Whoever fails to comply with any provision of shall be punished with imprisonment for a term
this Act for which no separate penalty has been which may extend to one year, or with fine or
provided in this Act with both.
having been convicted of any offence under shall not accept any foreign contribution for a
section 35 or section 37, insofar as such period of five years from the date of the
offence relates to the acceptance or utilisation subsequent conviction.
of foreign contribution, is again convicted of
such offence

Offences by companies
Where an offence under this Act or any rule or order made thereunder has been committed by a company,
every person who, at the time the offence was committed, was in charge of, and was responsible to, the
company for the conduct of the business of the company, as well as the company, shall be deemed to
be guilty of the offence and shall be liable to be proceeded against and punished accordingly.
However, such person shall not be liable to any punishment if he proves that the offence was committed –
• without his knowledge, or
• he had exercised all due diligence to prevent the commission of such offence.
Where an offence under this Act or any rule or order made thereunder has been committed by a
company and it is proved that the offence has been committed with the consent or connivance of, or
is attributable to any neglect on the part of, any director, manager, secretary or other officer of the
company, such director, manager, secretary or other officer-
shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and
punished accordingly.
Explanation.—For the purposes of this section,—
(a) “company” means any body corporate and includes a firm, society, trade union or other
association of individuals; and
(b) “director”, in relation to a firm, society, trade union or other association of individuals, means
a partner in the firm or a member of the governing body of such society, trade union or other
association of individuals.

© The Institute of Chartered Accountants of India

 4.26 CORPORATE AND ECONOMIC LAWS

Bar on prosecution of offences under the Act.

No court shall take cognizance of any offence under this Act, except with the previous sanction of
the Central Government or any officer authorised by that Government in this behalf.
Compounding of certain offences (Section 41)
• any offence punishable under this Act (whether committed by an individual or association or any
officer or employee thereof), not being an offence punishable with imprisonment only, may, before
the institution of any prosecution, be compounded by such officers or authorities and for such
sums as the Central Government may, by notification in the Official Gazette, specify.
• Compounding of offences as stated above, shall not apply to an offence committed by an
individual or association or its officer or other employee within a period of three years from the
date on which a similar offence committed by it or him was compounded under this section.
For the purposes of this section, any second or subsequent offence committed after the expiry
of a period of three years from the date on which the offence was previously compounded,
shall be deemed to be a first offence.
• Every officer or authority shall exercise the powers to compound an offence, subject to the
direction, control and supervision of the Central Government.
• Where any offence is compounded before the institution of any prosecution, no prosecution
shall be instituted in relation to such offence, against the offender in relation to whom the
offence is so compounded.
• Every officer or authority while dealing with a proposal for the compounding of an offence for
a default in compliance with any provision of this Act which requires by an individual or
association or its officer or other employee to obtain permission or file or register with, or
deliver or send to, the Central Government or any prescribed authority any return, account or
other document, may-
direct, by order, any individual or association or its officer or other employee to file or register
with, such return, account or other document within such time as may be specified in the order.

8. MISCELLANEOUS
(I) Power to call of information or document and Investigation into cases under the
Act (Sections 42 &43)
• Any inspecting officer, authorised by the Central Government may, during the course of any
inspection of any account or record maintained by any political party, person, organisation or
association in connection with the contravention of any provision of this Act,—
(a) call for information from any person for the purpose of satisfying himself whether there
has been any contravention of the provisions of this Act or rule or order made
thereunder;

© The Institute of Chartered Accountants of India

 THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.27

(b) require any person to produce or deliver any document or thing useful or relevant to
such inspection;
(c) examine any person acquainted with the facts and circumstances of the case related
to the inspection.
• Investigation into cases under the Act Any offence punishable under this Act may also be
investigated into by such authority as the Central Government may specify in this behalf and
the authority so specified shall have all the powers which an officer-in-charge of a police station
has while making an investigation into a cognizable offence.
(II) Power of Central Government to give directions and delegation of powers (Sections 46 & 47)
• The Central Government may give such directions as it may deem necessary to any other
authority or any person or class of persons regarding the carrying into execution of the
provisions of this Act, except power to make rule under section 48.
(III) Power to make rules(Section 48)
The Central Government may, by notification, make rules for carrying out the provisions of this Act.
(IV) Power to exempt in certain cases (Section 50)
If the Central Government is of opinion that it is necessary or expedient in the interests of the general
public so to do, it may-
• by order and subject to such conditions as may be specified in the order, exempt-
o any person or
o association or
o organisation (not being a political party), or
o any individual (not being a candidate for election)
• from the operation of all or any of the provisions of this Act and may, revoke or modify such
order.
(V) Act not to apply to certain Government transactions (Section 51)
Nothing contained in this Act shall apply to any transaction between-
• the Government of India, and
• the Government of any foreign country or territory.
(VI) Application of other laws not barred (Section 52)
The provisions of this Act shall be in addition to, and not in derogation of, the provisions of any other
law for the time being in force.

© The Institute of Chartered Accountants of India

 4.28 CORPORATE AND ECONOMIC LAWS

TEST YOUR KNOWLEDGE

Multiple Choice Questions
1. As per the FCRA, the restrictions on ‘foreign contribution’ are applicable if the foreign
contribution is from ‘foreign source’. Who among the following are excluded from the purview
of foreign source in the Act-
(a) United nations
(b) World Bank
(c) International monetary Fund
(d) All of the above
2. Surya Ltd., incorporated and registered in New Delhi with a foreign shareholding more than
50% due to liberalisation in Foreign Direct Investment (FDI) policy.
State the correct statement as to the status of the Surya Ltd.
(a) Surya limited shall not be considered as foreign source because of its registration in
India.
(b) Surya Ltd would be ‘foreign source’ having foreign shareholding more than 50% of
foreign company.
(c) Surya Ltd would be ‘foreign source’ having foreign contribution through various
international agencies.
(d) Both (b) & (c)
3. An association was holding the certificate of registration making it eligible for acceptance of
foreign contribution established for the betterment of poor children. Central Government
later cancelled the certificate of the association for violation of the terms and conditions of
certificate for being not engaged in chosen activity for the poor children. Such association
again applied for the registration. State weather the association is eligible for registration-
(a) Yes, it can apply freshly at any time
(b) No, permanently becomes disqualified
(c) yes, after 3 years from the date of cancellation of certificate
(d) after reasonable opportunity of being heard, and on warning, same registration will be
restored.

© The Institute of Chartered Accountants of India

 THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.29

Descriptive Questions
Question 1
State under what circumstances Government can cancel the certificate of registration
granted to a person under FCRA?
Question 2
X, is an association having registration to transfer the Foreign Contribution received by it to
another organization? Is the valid act of X? If yes, then what is the process to do so? Is
there any restriction on transfer of funds to other organisations?
Question 3
Can foreign contribution be received in and utilised from multiple Bank Accounts?
Question 4
Can capital assets purchased with the help of foreign contributions be acquired in the name
of the Mr Ram, an office bearers of the association?

ANSWER/SUGGESTED
Answer to MCQs
1. (d) Hint: Foreign source includes Foreign Government, international agency (but not UN or
its agencies, World Bank, IMF etc.), foreign company, multi-national corporation, company
where more than 50% capital is held by foreigner or foreign company, foreign trust, foreign
citizen etc. [section 2(1)(j) of FCRA, 2010.
2. (b) Hints: Many companies in India have foreign shareholding more than 50% due to
liberalisation in Foreign Direct Investment (FDI) policy. These would be ‘foreign source’ as
per section 2(1)(j)(vi) of FCRA. Receipt of donations/contributions directly or indirectly by
persons and organisations from these companies are presently violative of the FCRA.
3. (c) Hint: As per section 14 of the FCRA, cooling period of 3 years is prescribed for registration
of any person whose certificate has been cancelled by the Central Government.
Answer to Descriptive Questions
1. Yes. As per section 14 of the FCRA, Central Government may cancel the certificate, after
carrying out an inquiry, on the following grounds –
(a) the holder of the certificate has made an incorrect/false statement in the application
for the grant of registration or renewal
(b) the holder of the certificate has violated any of the terms and conditions of the
certificate or renewal thereof

© The Institute of Chartered Accountants of India

 4.30 CORPORATE AND ECONOMIC LAWS

(c) in the opinion of the Central Government, it is necessary in the public interest to cancel
the certificate
(d) the holder of the certificate has violated any of the provisions of this Act or rules or
order made thereunder.
(e) if the holder of the certificate has not been engaged in any reasonable activity in its
chosen field for the benefit of the society for two consecutive years or has become
defunct.
In any person whose certificate has been cancelled under this section shall not be eligible for
registration or grant of prior permission for a period of three years from the date of
cancellation of such certificate.
2. Yes X can transfer the Foreign Contribution received by it to another organization as per
section 7 of FCRA, 2010. According to the provision no person who –
o is registered and granted a certificate or has obtained prior permission under this Act;
and
o receives any foreign contribution,
shall transfer such foreign contribution to any other person unless such other person is also
registered and had been granted the certificate or obtained the prior permission under this
Act:
Provided that such person may transfer, with the prior approval of the Central Government,
a part of such foreign contribution to any other person who has not been granted a certificate
or obtained permission under this Act in accordance with the rules made by the Central
Government.”
Restrictions on transfer: Rule 24 of FCRR, 2011, prescribes the procedure for transferring
foreign contribution to any unregistered person as under:
(1) A person who has been granted a certificate of registration or prior permission under
section 11 and intends to transfer part of the foreign contribution received by him to a
person who has not been granted a certificate of registration or prior permission under
the Act, may transfer such foreign contribution to an extent not exceeding ten per cent
of the total value thereof and for this purpose, make an application to the Central
Government in the prescribed Form.
(2) Every application made under sub-rule (1) shall be accompanied by a declaration to
the effect that-
(a) the amount proposed to be transferred during the financial year is less than ten
per cent of the total value of the foreign contribution received by him during the
financial year;

© The Institute of Chartered Accountants of India

 THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 4.31

(b) the transferor shall not transfer any amount of foreign contribution until the
Central Government approves such transfer.
(3) A person who has been granted a certificate of registration or prior permission under
section 11 shall not be required to seek the prior approval of the Central Government for
transferring the foreign contribution received by him to another person who has been
granted a certificate of registration or prior permission under the Act provided that the
recipient has not been proceeded against under any of the provisions of the Act.
(4) Both the transferor and the recipient shall be responsible for ensuring proper utilisation
of the foreign contribution so transferred and such transfer of foreign contribution shall
be reflected in the returns in Form to be submitted by both the transferor and the
recipient."
3. The foreign contribution should be received only in the exclusive single foreign contribution
account of a Bank (also called designated FC account), as mentioned in the order for
registration or prior permission granted and should be separately maintained by the
associations. However, one or more accounts (called Utilization Account) in one or more
banks may be opened by the association for ‘utilising’ the foreign contribution after it has
been received in the designated FCRA bank account, provided that no funds other than that
foreign contribution shall be received or deposited in such account or accounts and in all such
cases, intimation is to be given online within 15 days of opening of such account.
4. No. Every asset purchased with foreign contribution should be acquired and possessed in
the name of the association since an association has a separate legal entity distinct from its
members.

© The Institute of Chartered Accountants of India